PetSmart Reports Results for the Third Quarter 2011

By Benzinga Staff
November 16, 2011 5:04 PM

PHOENIX--(BUSINESS WIRE)--

PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.50 per share, up 32% compared to $0.38 per share in the third quarter of 2010. Net income totaled $56 million in the third quarter of 2011, compared to $46 million in the third quarter of 2010.

Total sales for the third quarter of 2011 increased 8% to $1.5 billion. The increase in sales was partially impacted by $3 million in favorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 6.1%, benefiting from comparable transactions growth of 2.2%. Services sales, which are included in total sales, grew 9% to $161 million.

During the third quarter, the company generated $124 million in operating cash flow, spent $28 million in capital expenditures, distributed $16 million in dividends, and repurchased $70 million of PetSmart stock. The company ended the quarter with $333 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility.

“The favorable momentum that we experienced during the quarter validates the work that we are doing, and continues to move us forward on our journey to becoming a best-in-class specialty retailer,” said Bob Moran, President and Chief Executive Officer.

“For the full year, we expect comparable store sales growth of mid-single digits. We are raising our earnings per share guidance from a previous range of $2.46 to $2.52 to our current expectations of $2.50 to $2.54,” said Chip Molloy, Senior Vice President and Chief Financial Officer. “For the fourth quarter of 2011, we are expecting comparable store sales growth in the low- to mid-single digit range, and earnings per share between $0.85 and $0.89.”

Conference call information

PetSmart management has scheduled a teleconference for 4:30 p.m. EST on November 16, 2011 to discuss results for the third quarter 2011. This teleconference will be webcast live for all investors at www.petm.com or www.streetevents.com. The webcast will be available until the company announces results for the fourth quarter of 2011. In addition, you can listen to the call live by dialing 866-219-5885 (within the United States and Canada) or 703-639-1124 (for international callers), code 1556760.

A phone replay will be available through December 16, 2011, 11:59 p.m. EST, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1556760.

About PetSmart

PetSmart, Inc. (NASDAQ: PETM) is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company employs approximately 50,000 associates and operates more than 1,210 pet stores in the United States, Canada and Puerto Rico, over 189 in-store PetSmart^® PetsHotel^® dog and cat boarding facilities and is a leading online provider of pet supplies and pet care information (http://www.petsmart.com). PetSmart provides a broad range of competitively priced pet food and pet products; and offers dog training, pet grooming, pet boarding, PetSmart Doggie Day Camp ^SM day care services and pet adoption services. Since 1994, PetSmart Charities, Inc., an independent 501(c)(3) non-profit animal welfare organization and the largest funder of animal welfare efforts in North America, has provided more than $134 million in grants and programs benefiting animal welfare organizations. Through its in-store pet adoption partnership with PetSmart Charities^®, PetSmart has helped save the lives of more than 4.7 million pets.

Forward-looking statements

This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2011 guidance. These "forward-looking statements" are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in general economic conditions; conditions affecting customer transactions and average ticket including, but not limited to, weather conditions or other seasonal events; our ability to compete effectively; disruption of our supply chain; our ability to effectively manage our growth and operations; changes in our cost structure; and changes in the legal or regulatory environment. Undue reliance should not be placed on such forward-looking statements as they speak only as of the date hereof, and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. For additional information on these and other factors that arise when investing in PetSmart, please see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.

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PetSmart, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)

	October 30,			January 30,			October 31,
	2011			2011			2010

Assets
Cash and cash equivalents	$	271,252		$	291,949		$	235,407
Short-term investments		19,555			9,708			-
Restricted cash		61,439			61,439			46,515
Receivables, net		65,709			53,971			43,108
Merchandise inventories		707,997			615,841			687,825
Deferred income taxes		44,999			44,999			36,805
Prepaid expenses and other current assets		88,908			46,022			91,822

Total current assets		1,259,859			1,123,929			1,141,482

Property and equipment, net		1,064,993			1,132,435			1,150,286
Equity investment in Banfield		35,082			42,858			38,691
Deferred income taxes		95,426			96,215			86,199
Goodwill		44,266			44,111			43,555
Other noncurrent assets		34,336			30,672			29,140

Total assets	$	2,533,962		$	2,470,220		$	2,489,353

Liabilities and Stockholders' Equity
Accounts payable and bank overdraft	$	228,431		$	168,776		$	201,564
Accrued payroll, bonus and employee benefits		149,032			139,359			125,563
Accrued occupancy expenses and deferred rents		72,563			64,328			67,606
Current maturities of capital lease obligations		52,446			45,277			43,503
Other current liabilities		169,733			156,065			155,655

Total current liabilities		672,205			573,805			593,891

Capital lease obligations		511,984			521,552			528,270
Deferred rents		82,565			86,027			87,479
Other noncurrent liabilities		121,068			118,194			107,078

Total liabilities		1,387,822			1,299,578			1,316,718

Stockholders' Equity:
Preferred stock; $.0001 par value		-			-			-
Common stock; $.0001 par value		16			16			16
Additional paid-in capital		1,290,152			1,222,340			1,201,158
Retained earnings		1,420,471			1,277,803			1,201,957
Accumulated other comprehensive income		5,731			5,380			4,478
Less: Treasury stock		(1,570,230	)		(1,334,897	)		(1,234,974	)

Total stockholders' equity		1,146,140			1,170,642			1,172,635

Total liabilities and stockholders' equity	$	2,533,962		$	2,470,220		$	2,489,353


PetSmart, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share and store data)
(Unaudited)

	Thirteen Weeks Ended					Thirteen Weeks Ended					Thirty-Nine Weeks Ended					Thirty-Nine Weeks Ended
	October 30, 2011			% of Sales		October 31, 2010			% of Sales		October 30, 2011			% of Sales		October 31, 2010			% of Sales

Merchandise sales	$	1,326,819		88.6	%	$	1,230,911		88.7	%	$	3,941,641		88.1	%	$	3,681,188		88.2	%
Services sales		161,339		10.8	%		148,282		10.7	%		506,380		11.3	%		466,874		11.2	%
Other revenue		9,399		0.6	%		8,877		0.6	%		27,455		0.6	%		25,701		0.6	%

Net sales		1,497,557		100.0	%		1,388,070		100.0	%		4,475,476		100.0	%		4,173,763		100.0	%

Cost of merchandise sales		940,960		62.8	%		880,556		63.4	%		2,777,172		62.1	%		2,619,624		62.8	%
Cost of services sales		119,038		8.0	%		109,652		7.9	%		364,290		8.1	%		338,866		8.1	%
Cost of other revenue		9,399		0.6	%		8,877		0.6	%		27,455		0.6	%		25,701		0.6	%

Total cost of sales		1,069,397		71.4	%		999,085		72.0	%		3,168,917		70.8	%		2,984,191		71.5	%

Gross profit		428,160		28.6	%		388,985		28.0	%		1,306,559		29.2	%		1,189,572		28.5	%

Operating, general and administrative expenses		326,964		21.8	%		305,345		22.0	%		973,404		21.7	%		910,664		21.8	%

Operating income		101,196		6.8	%		83,640		6.0	%		333,155		7.4	%		278,908		6.7	%

Interest expense, net		(14,038	)	-0.9	%		(14,289	)	-1.0	%		(42,740	)	-1.0	%		(44,222	)	-1.1	%

Income before income tax expense and equity in income from Banfield		87,158		5.8	%		69,351		5.0	%		290,415		6.5	%		234,686		5.6	%

Income tax expense		(33,826	)	-2.3	%		(26,386	)	-1.9	%		(110,356	)	-2.5	%		(91,300	)	-2.2	%

Equity in income from Banfield		2,826		0.2	%		2,648		0.2	%		8,184		0.2	%		6,205		0.1	%

Net income	$	56,158		3.7	%	$	45,613		3.3	%	$	188,243		4.2	%	$	149,591		3.6	%

Earnings per common share:
Basic	$	0.50				$	0.39				$	1.67				$	1.27
Diluted	$	0.50				$	0.38				$	1.65				$	1.25

Weighted average shares outstanding:
Basic		111,330					116,943					112,425					117,333
Diluted		113,081					119,360					114,399					119,771

Stores open at beginning of each period		1,197					1,164					1,187					1,149
Stores opened during each period		15					10					28					29
Stores closed during each period		(2	)				(2	)				(5	)				(6	)
Stores open at end of each period		1,210					1,172					1,210					1,172